Question 1

If Japan has a trade surplus and the United States has a trade deficit, the trade gap could be eliminated by:

Accepted Answer

A) contractionary monetary policy in both Japan and the United States. 
B) expansionary monetary policy in both Japan and the United States. 
C) expansionary monetary policy in Japan or contractionary monetary policy in the United States. 
D) contractionary monetary policy in Japan or expansionary monetary policy in the United States. 
A) contractionary monetary policy in both Japan and the United States. 
B) expansionary monetary policy in both Japan and the United States. 
C) expansionary monetary policy in Japan or contractionary monetary policy in the United States. 
D) contractionary monetary policy in Japan or expansionary monetary policy in the United States.

Question 2

Considering only its direct effect on income, expansionary monetary policy tends to:

Accepted Answer

A) increase income and imports, shifting the U.S.trade balance in the direction of deficit. 
B) increase income and imports, shifting the U.S.trade balance in the direction of surplus. 
C) decrease income and imports, shifting the U.S.trade balance in the direction of deficit. 
D) decrease income and imports, shifting the U.S.trade balance in the direction of surplus. 
A) increase income and imports, shifting the U.S.trade balance in the direction of deficit. 
B) increase income and imports, shifting the U.S.trade balance in the direction of surplus. 
C) decrease income and imports, shifting the U.S.trade balance in the direction of deficit. 
D) decrease income and imports, shifting the U.S.trade balance in the direction of surplus.

Question 3

Considering only its direct effect on income, contractionary monetary policy tends to:

Accepted Answer

A) increase a trade deficit and decrease the exchange rate. 
B) increase a trade deficit and increase the exchange rate. 
C) decrease a trade deficit and decrease the exchange rate. 
D) decrease a trade deficit and increase the exchange rate. 
A) increase a trade deficit and decrease the exchange rate. 
B) increase a trade deficit and increase the exchange rate. 
C) decrease a trade deficit and decrease the exchange rate. 
D) decrease a trade deficit and increase the exchange rate.

Question 4

In considering the net effect of expansionary fiscal policy on the trade deficit, the:

Accepted Answer

A) income effect offsets the price effect. 
B) price effect offsets the income effect. 
C) income and price effects work in the same direction, so the trade deficit is decreased. 
D) income and price effects work in the same direction, so the trade deficit is increased. 
A) income effect offsets the price effect. 
B) price effect offsets the income effect. 
C) income and price effects work in the same direction, so the trade deficit is decreased. 
D) income and price effects work in the same direction, so the trade deficit is increased.

Question 5

What would make foreigners want to buy more from the United States?

Accepted Answer

A) Inflation in United States 
B) A fall in the value of the dollar in the foreign exchange market 
C) Htariffs 
D) Lower interest rates in the United States 
A) Inflation in United States 
B) A fall in the value of the dollar in the foreign exchange market 
C) Htariffs 
D) Lower interest rates in the United States

Question 6

Internationalization of the debt refers to a situation in which the deficit is financed by foreigners:

Accepted Answer

A) buying the debt, so that crowding out is avoided. 
B) buying the debt, so that crowding out is increased. 
C) selling the debt, so that crowding out is increased. 
D) selling the debt, so that crowding out is avoided. 
A) buying the debt, so that crowding out is avoided. 
B) buying the debt, so that crowding out is increased. 
C) selling the debt, so that crowding out is increased. 
D) selling the debt, so that crowding out is avoided.

Question 7

Considering only their direct effect on income, which of the following policies is least likely to reduce a country's trade deficit?

Accepted Answer

A) A decrease in the money supply 
B) A cut in taxes 
C) A decrease in government spending 
D) An increase in taxes 
A) A decrease in the money supply 
B) A cut in taxes 
C) A decrease in government spending 
D) An increase in taxes

Question 8

If foreigners become unwilling to hold U.S.assets, the U.S.trade balance will:

Accepted Answer

A) go further into deficit. 
B) go further into surplus. 
C) experience smaller deficits. 
D) experience smaller surpluses. 
A) go further into deficit. 
B) go further into surplus. 
C) experience smaller deficits. 
D) experience smaller surpluses.

Question 9

If a country cannot internationalize its debt, then it will have to:

Accepted Answer

A) sell more bonds domestically, causing its interest rates to fall. 
B) sell more bonds domestically, causing its interest rates to rise. 
C) buy more bonds domestically, causing its interest rates to fall. 
D) buy more bonds domestically, causing its interest rates to rise. 
A) sell more bonds domestically, causing its interest rates to fall. 
B) sell more bonds domestically, causing its interest rates to rise. 
C) buy more bonds domestically, causing its interest rates to fall. 
D) buy more bonds domestically, causing its interest rates to rise.

Question 10

Considering its direct effect on income, which of the following policies is most likely to reduce a country's trade deficit?

Accepted Answer

A) An increase in the money supply. 
B) A cut in taxes. 
C) An increase in government spending. 
D) An increase in taxes. 
A) An increase in the money supply. 
B) A cut in taxes. 
C) An increase in government spending. 
D) An increase in taxes.

Question 11

If a country's trade deficit declines but does not go into surplus, then:

Accepted Answer

A) its consumption must be rising relative to its production. 
B) it must be selling fewer assets to foreigners. 
C) it must be buying more assets from foreigners. 
D) it must be producing more than it is consuming. 
A) its consumption must be rising relative to its production. 
B) it must be selling fewer assets to foreigners. 
C) it must be buying more assets from foreigners. 
D) it must be producing more than it is consuming.

Question 12

Which of the following best explains a government's motive for reducing the value of its currency?

Accepted Answer

A) Increase the trade balance and prevent the price level from falling further 
B) Increase the trade balance and prevent the price level from rising further 
C) Decrease the trade balance and prevent the price level from rising further 
D) Decrease the trade balance and prevent the price level from falling further 
A) Increase the trade balance and prevent the price level from falling further 
B) Increase the trade balance and prevent the price level from rising further 
C) Decrease the trade balance and prevent the price level from rising further 
D) Decrease the trade balance and prevent the price level from falling further

Question 13

Domestic goals dominate international goals for all of the following reasons except:

Accepted Answer

A) international goals are ambiguous. 
B) international goals affect a country's population indirectly. 
C) countries are becoming more economically integrated. 
D) in politics, indirect effects take a back seat. 
A) international goals are ambiguous. 
B) international goals affect a country's population indirectly. 
C) countries are becoming more economically integrated. 
D) in politics, indirect effects take a back seat.

Question 14

In the mid-1960s, the United States was running an expansionary fiscal policy to support the war effort in Vietnam.This likely:

Accepted Answer

A) improved the trade deficit. 
B) worsened the trade deficit. 
C) left the trade deficit the same. 
D) had ambiguous effects on the trade deficit. 
A) improved the trade deficit. 
B) worsened the trade deficit. 
C) left the trade deficit the same. 
D) had ambiguous effects on the trade deficit.

Question 15

What is the primary benefit to the United States of a high price for the dollar in the foreign exchange market?

Accepted Answer

A) It makes foreign goods cheaper, helping consumers. 
B) It encourages exports, helping producers. 
C) It increases the international status of other countries, which gives them an incentive to be our trading partners. 
D) There are no benefits to the United States of a high price for the dollar; a lower price is always better. 
A) It makes foreign goods cheaper, helping consumers. 
B) It encourages exports, helping producers. 
C) It increases the international status of other countries, which gives them an incentive to be our trading partners. 
D) There are no benefits to the United States of a high price for the dollar; a lower price is always better.

Question 16

The reason that domestic goals tend to dominate the political agenda is that:

Accepted Answer

A) there are no real international goals. 
B) there is complete agreement on international goals but domestic goals are uncertain. 
C) inflation, unemployment, and growth affect a country's citizens more directly. 
D) trade deficits and exchange rates affect a country's citizens more directly. 
A) there are no real international goals. 
B) there is complete agreement on international goals but domestic goals are uncertain. 
C) inflation, unemployment, and growth affect a country's citizens more directly. 
D) trade deficits and exchange rates affect a country's citizens more directly.

Question 17

A trade deficit allows a country to:

Accepted Answer

A) consume more than it produces. 
B) produce more than it consumers. 
C) produce up to the level of desired consumption. 
D) consume up to the level of potential production. 
A) consume more than it produces. 
B) produce more than it consumers. 
C) produce up to the level of desired consumption. 
D) consume up to the level of potential production.

Question 18

A low exchange rate for the dollar makes foreign currencies:

Accepted Answer

A) cheaper, lowering the price of imports. 
B) cheaper, raising the price of imports. 
C) more expensive, lowering the price of imports. 
D) more expensive, raising the price of imports. 
A) cheaper, lowering the price of imports. 
B) cheaper, raising the price of imports. 
C) more expensive, lowering the price of imports. 
D) more expensive, raising the price of imports.

Question 19

A weaker dollar would be a good policy if the U.S.government wanted to:

Accepted Answer

A) increase U.S.exports and expand the U.S.economy. 
B) increase U.S.imports and expand the U.S.economy. 
C) reduce U.S.exports and slow the U.S.economy. 
D) reduce U.S.imports and slow the U.S.economy. 
A) increase U.S.exports and expand the U.S.economy. 
B) increase U.S.imports and expand the U.S.economy. 
C) reduce U.S.exports and slow the U.S.economy. 
D) reduce U.S.imports and slow the U.S.economy.

Question 20

In the short run, crowding out could be avoided if foreigners:

Accepted Answer

A) sold the U.S.debt at a higher interest rate. 
B) sold the U.S.debt at the existing interest rate. 
C) bought the U.S.debt at a higher interest rate. 
D) bought the U.S.debt at the existing interest rate. 
A) sold the U.S.debt at a higher interest rate. 
B) sold the U.S.debt at the existing interest rate. 
C) bought the U.S.debt at a higher interest rate. 
D) bought the U.S.debt at the existing interest rate.

Exam 36: Macro Policy in a Global Setting

If Japan has a trade surplus and the United States has a trade deficit, the trade gap could be eliminated by:

Considering only its direct effect on income, expansionary monetary policy tends to:

Considering only its direct effect on income, contractionary monetary policy tends to:

In considering the net effect of expansionary fiscal policy on the trade deficit, the:

What would make foreigners want to buy more from the United States?

Internationalization of the debt refers to a situation in which the deficit is financed by foreigners:

Considering only their direct effect on income, which of the following policies is least likely to reduce a country's trade deficit?

If foreigners become unwilling to hold U.S.assets, the U.S.trade balance will:

If a country cannot internationalize its debt, then it will have to:

Considering its direct effect on income, which of the following policies is most likely to reduce a country's trade deficit?

If a country's trade deficit declines but does not go into surplus, then:

Which of the following best explains a government's motive for reducing the value of its currency?

Domestic goals dominate international goals for all of the following reasons except:

In the mid-1960s, the United States was running an expansionary fiscal policy to support the war effort in Vietnam.This likely:

What is the primary benefit to the United States of a high price for the dollar in the foreign exchange market?

The reason that domestic goals tend to dominate the political agenda is that:

A trade deficit allows a country to:

A low exchange rate for the dollar makes foreign currencies:

A weaker dollar would be a good policy if the U.S.government wanted to:

In the short run, crowding out could be avoided if foreigners:

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Structural Stagnation and Globalization

Macro Policy in Developing Countries

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